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This pet drops from The Writhing Mire in Spires of Arak. Inside a cave you'll find a nest with an egg on it called Varasha's Egg.
Opening it will cause a rarespawn, Varasha herself, to charge into the cave.
Initially she will be a neutral mob and unattackable, but after she's checked her nest for a few moments she will turn hostile. I completed the fight as a level 100, so it wasn't bad at all. Even as a max level toon, it's wise to move out of her frontal channeled attack and the bad stuff that spawns on the ground.
Once you defeat her, the egg in the nest will be lootable again and inside you'll find an adorable Hydraling companion. :D
Once you loot the pet, it doesn't seem as though you can loot spawn Varasha a second time on the same character.
I'm unsure what will happen if you complete this while in a group, but the egg respawns fairly quickly (at least on beta). I don't know if others in the group who did not loot the pet can summon Varasha and complete the encounter again, but I would assume so. If not, then hopefully everyone in the group that initially engaged the rarespawn can collect the pet.
One more dropped pet down, so many more to discover. Awesome stuff. Thanks to all that report stuff like this in! :)